Correlation Between Bank of Nanjing and Xiamen ITG

Can any of the company-specific risk be diversified away by investing in both Bank of Nanjing and Xiamen ITG at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bank of Nanjing and Xiamen ITG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of Nanjing and Xiamen ITG Group, you can compare the effects of market volatilities on Bank of Nanjing and Xiamen ITG and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bank of Nanjing with a short position of Xiamen ITG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nanjing and Xiamen ITG.

Diversification Opportunities for Bank of Nanjing and Xiamen ITG

0.62

Correlation Coefficient

Bank of Nanjing  Xiamen ITG

Poor diversification

The 3 months correlation between Bank and Xiamen is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Nanjing and Xiamen ITG Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen ITG Group and Bank of Nanjing is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bank of Nanjing are associated (or correlated) with Xiamen ITG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen ITG Group has no effect on the direction of Bank of Nanjing i.e., Bank of Nanjing and Xiamen ITG go up and down completely randomly.

Pair Corralation between Bank of Nanjing and Xiamen ITG

Assuming the 90 days trading horizon Bank of Nanjing is expected to generate 4.52 times less return on investment than Xiamen ITG. But when comparing it to its historical volatility, Bank of Nanjing is 1.39 times less risky than Xiamen ITG. It trades about 0.03 of its potential returns per unit of risk. Xiamen ITG Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  578.00  in Xiamen ITG Group on September 23, 2024 and sell it today you would earn a total of  85.00  from holding Xiamen ITG Group or generate 14.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bank of Nanjing  vs.  Xiamen ITG Group

Bank of Nanjing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nanjing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bank of Nanjing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xiamen ITG Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen ITG Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen ITG sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Nanjing and Xiamen ITG

The main advantage of trading using opposite Bank of Nanjing and Xiamen ITG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nanjing position performs unexpectedly, Xiamen ITG can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Xiamen ITG will offset losses from the drop in Xiamen ITG's long position.

The idea behind Bank of Nanjing and Xiamen ITG Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.